MURBY v. HEALTH FACILITIES APPEALS BOARD (2019)

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

This case arises under sections 25B-25G of G. L. c. 111, which were enacted “[t]o prevent unnecessary expansion of health care facilities in the Commonwealth and encourage appropriate allocation of resources for health care purposes.” Commissioner of Pub. Health v. Bessie M. Burke Memorial Hosp., 366 Mass. 734, 735 (1975). To that end, the statute prohibits anyone from making a substantial capital expenditure for the construction of a health care facility without first obtaining a determination of need from the Department of Public Health (DPH). G. L. c. 111, § 25C (a). The plaintiffs appeal from a Superior Court judgment affirming the DPH's approval of a determination of need application to expand Boston Children's Hospital (hospital). We affirm.

1. Background. On December 7, 2015, Children's Hospital Corporation filed a determination of need application with the DPH for construction of an inpatient clinical care building on the hospital's main campus, as well as an ambulatory services center in Brookline.⁴ A ten-month review process followed, during which the DPH held a public hearing and received and reviewed written comments. The DPH also obtained an independent cost analysis (ICA) prepared by a third-party consultant. After reviewing all of these materials, the DPH issued a staff report recommending approval of the application. In response to additional comments submitted by the Health Policy Commission ⁵ and others, the DPH supplemented its report with an addendum intended to address some of those comments.⁶ On October 27, 2016, after a second public hearing, the DPH issued its decision approving the application. The DPH decision included several conditions. One of those conditions, “condition 8,” contained elaborate provisions directed to ensuring that costs would not be inappropriately passed on to Massachusetts patients and that the new beds would be used to meet anticipated out-of-State demand.

2. Discussion. a. Regulatory framework and standard of review. An applicant seeking a determination of need from the DPH must make a “clear and convincing demonstration” that its proposed project satisfies certain regulatory factors. 105 Code Mass. Regs. § 100.533(A) (2008). If that demonstration is made with respect to each of the governing factors, the DPH shall determine that need exists for a project. See § 100.533(A) (“The Department shall determine that need exists for a project or part thereof where, on the basis of material in the record, the applicant makes a clear and convincing demonstration that the project or part meets each of the governing factors”). When Children's Hospital Corporation submitted its application, the factors, in relevant part, provided that (1) “[t]he project, upon completion, will satisfy ․ health care requirements of the projected population of the applicable service area, without any duplication of services,” and (2) the proposed capital expenditure is reasonable, including consideration of “the likely effect upon charges to the public.” 105 Code Mass. Regs. § 100.533(B)(2), (5) (2014). See 105 Code Mass. Regs. § 100.533(B)(1) (2014) (“The applicant must also demonstrate that the proposed project will not duplicate existing resources in the applicable service area”).

Once the DPH has made a determination of need, the scope of our review is narrow. We review “whether [a DPH] decision was legally infirm because arrived at arbitrarily or capriciously, without observance of procedure required by law, or in violation of applicable provisions of substantive law.” Howe v. Health Facilities Appeals Bd., 20 Mass. App. Ct. 531, 534 (1985). This standard “requires only that there be a rational basis for the decision.” Id. However, even under this deferential standard, a DPH decision requires “some factual support.” Id. at 537 n.6.

b. Determination of need and condition 8. The plaintiffs cite concerns regarding the condition 8 reporting requirement, which they view as an abdication of the DPH's obligation to determine need before construction commences. The plaintiffs argue that the purported need for expansion of the hospital is based, impermissibly, on future out-of-State patient volume and that instead of addressing this argument, the DPH imposed condition 8 to monitor whether the anticipated volume ever develops.⁷

Turning first to whether an applicant may rely on out-of-State patient volume to demonstrate need, the plaintiffs note that the DPH must determine whether a project will satisfy health care requirements of the “applicable service area.” 105 Code Mass. Regs. § 100.533(B)(2). Here, the DPH determined that the “applicable service area” was “regional, national, and international patients with high acuity.” The DPH based this determination on the unique, specialized care that the hospital provides, and the plaintiffs have not offered any argument as to why this determination was arbitrary or capricious. The plaintiffs' argument, thus, has no merit.⁸

Turning next to whether a determination of need may be based on an anticipated future need or whether the need must already exist, the plaintiffs rely on the present tense wording of the statute. See G. L. c. 111, § 25C (a) (requiring “that there is need”). However, it seems manifest that in evaluating the need for capital expenditures, the statute contemplates an evaluation of future need. We note that the DPH must determine whether a “project, upon completion, will satisfy ․ health care requirements of the projected population” (emphasis added). 105 Code Mass. Regs. § 100.533(B)(2). Nonetheless, we need not resolve this question because it is clear to us that the DPH decision was based on an already existing need. As the DPH found, “[G]iven the high occupancy rates and space limitations of [the hospital's] current units, the proposal to consolidate services into a more coordinated, multi-disciplinary service will better serve all patients in a more efficient manner.” This finding is amply supported by the evidence, including evidence that (1) capacity constraints have required the hospital to turn single-bedded rooms into double-bedded rooms, (2) the hospital has shifted less complex surgical cases to satellite locations to compensate for demand at the main campus, (3) optimal occupancy rates for the hospital's heart center and neonatal intensive care unit are frequently exceeded, and (4) patients are experiencing long wait times for necessary diagnostic tools. Moreover, we note that out-of-State demand is already increasing and that patients from outside Massachusetts increased from approximately twenty percent of total hospital patients in 2009 to twenty-five percent in 2014.

Based on this analysis, it is clear to us that the DPH made the required determination of need. We thus see no merit in the plaintiffs' argument that the DPH impermissibly imposed condition 8 to defer making that determination.

c. Duplication of services. The plaintiffs also argue that there was no finding regarding duplication of services. We disagree. The DPH found that the hospital's business model has shifted toward caring for “patients with a particularly high acuity.” This finding is supported by evidence in the ICA that the hospital has expertise in treating rare and complex conditions requiring subspecialized care and that patients travel nationally and internationally to the hospital for treatment. As noted by the DPH, “Higher acuity patients are already coming into [the hospital] for more complex specialized procedures than are provided at their local hospital.” While the DPH staff report did not use language that mirrors the wording of the regulation, it is clear to us that the DPH did make the required finding. Cf. Commonwealth v. Rodriguez, 431 Mass. 804, 810 (2000) (“A judge need not use any particular set of words in making a finding”).

d. Proposed capital expenditure and the Prouty Garden. The plaintiffs contend that the DPH ignored evidence on two final points: (1) whether the proposed capital expenditure underestimated costs by excluding costs associated with what the plaintiffs describe as an “enabling project,” and (2) the healing and soothing powers of the Prouty Garden, which was eliminated to expand the hospital. As to the proposed capital expenditure, the plaintiffs have not explained how the “enabling project” is related to the expansion at issue here and why, as a matter of law, those costs needed to be included in the proposed capital expenditure. Regarding the Prouty Garden, the plaintiffs argue that the DPH erroneously excluded the loss of the garden from its review, but they have not articulated how including the loss of the garden in its review would have changed the DPH's analysis.⁹ As such, these arguments are not persuasive.

e. Motion to amend. Lastly, the plaintiffs argue that the judge erred in denying their motion to amend the complaint to add a count alleging violations of the determination of need terms and conditions and seeking revocation of the determination of need on that basis. However, such review is available with the DPH. See 105 Code Mass. Regs. §§ 100.700, 100.980(B), and 100.981 (2014). Where the plaintiffs did not exhaust their administrative remedies through that process and the proposed amendment thus would have been futile, there was no abuse of discretion in the judge's decision not to allow the plaintiffs to amend the complaint. See Lahey Clinic Found., Inc. v. Health Facilities Appeals Bd., 376 Mass. 359, 371 (1978) (ten taxpayer group seeking revocation of determination of need must exhaust administrative remedies).

3. Conclusion. Based on the foregoing, we conclude that the DPH decision was neither arbitrary nor capricious and that the judge did not err in denying the plaintiffs' motion to amend.

Judgment affirmed.

FOOTNOTES

4.   The plaintiffs argue that the application was incomplete because Children's Hospital Corporation did not list, as requested, the names and titles of other providers that were consulted regarding the hospital's proposed expansion. As an initial matter, we note that the application alternatively included space for an explanation as to why other providers were not consulted. Children's Hospital Corporation chose to provide detailed information regarding its outreach efforts, including the names of numerous pediatric hospitals that it had consulted. Under these circumstances, we see no merit to the plaintiffs' argument.

5.   The Health Policy Commission is an independent State agency charged with monitoring health care spending growth. By statute, the Health Policy Commission must be given an opportunity to comment on a determination of need application. G. L. c. 111, § 25C (i). It did so here, expressing concern that the hospital's proposed expansion would increase health care spending in Massachusetts.

6.   The plaintiffs state throughout their brief that the DPH ignored comments favorable to the plaintiffs' position. This is not accurate. The DPH staff report and addendum acknowledged and discussed at length the contrary views offered. The plaintiffs' argument instead appears to go to how the DPH weighed those views, something that we will not disturb on appeal. See Howe v. Health Facilities Appeals Bd., 20 Mass. App. Ct. 531, 536 (1985) (no trial de novo in determination of need appeal).

7.   The plaintiffs further argue that when the anticipated volume is not realized, the hospital will draw patients from other local, less expensive providers, thereby increasing charges to the public in contravention of the regulatory scheme. See 105 Code Mass. Regs. § 100.533(B)(5) (requiring consideration of “the likely effect upon charges to the public”). This argument is grounded in the plaintiffs' belief that the DPH did not analyze the likelihood that the anticipated volume will be realized, a premise with which we disagree. The DPH stated that it looked at the relevant data and analysis and then found, “[C]onsidering [the hospital's] development of centers of excellence that already attract out of state and international patients of significantly high acuity ․ it appears that [the hospital] intends to keep its population base large by accessing patients outside of Massachusetts.” While the DPH also noted that it could not analyze the likelihood of the anticipated volume being fully realized, we view this comment as simply an accurate statement regarding the difficulty of predicting the future.

8.   To the extent the plaintiffs' argument regarding out-of-State patients goes to whether that demand will be realized, we address that argument in note 6, supra. To the extent the plaintiffs' argument instead goes to whether services will be duplicated in the applicable service area, we address that argument in section c, infra.

9.   We disagree with the premise of this argument, as the DPH explicitly stated that it “considered the thoughtful and concerned testimony [regarding the loss of the garden] in the context of review of alternative options for siting the expansion.”